contract dispute expertThe Wisconsin Court of Appeals recently heard a contract dispute involving a sales representative and two manufacturers, in which the appellant sales rep contended that the Appellees owed it approximately $1.2 million in commissions.

Appellant claimed that it fulfilled its contractual obligation to assist Appellees in securing a deal to sell an architectural feature for a building project in Saudi Arabia. But after the deal collapsed, Appellees refused to pay the commission. Appellant brought suit.

Addressing summary judgment motions, the trial court determined that the parties formed a contract through a series of letters and email messages. The court also determined, however, that the contract was ambiguous on the issue of what circumstances would trigger Appellant’s entitlement to a commission, creating a jury issue. At trial, a jury found in Appellees’ favor that Appellant was not entitled to a commission. Based on those verdicts, the jury didn’t reach questions about the amount of commission owed or the potential for exemplary damages.

On appeal, Appellant argued, inter alia, that the trial court erroneously exercised its discretion in allowing certain expert testimony at trial and instructing the jury that it could consider the expert testimony.

The trial court allowed both sides to offer expert testimony on custom and usage, after determining that expert testimony could assist the jury in resolving ambiguity in the contract between the parties. The judge gave the jury the standard jury instruction on how to consider expert testimony. Appellant argued that both of these were erroneous exercises of discretion.

In a per curiam decision, the Wisconsin Court of Appeals wrote that a trial court has wide discretion in determining which jury instructions to give. They noted that the state supreme court has held that, “[i]f the given jury instructions adequately communicated the law and were applicable to the facts, no grounds for reversal exist.”

Under this standard, the appellate court affirmed that the trial court relied on facts of record, the applicable law, and used a demonstrable rational process to reach a reasonable decision.

At trial, Appellant objected to the court giving WIS JI-CIVIL260, in any form. This is a standard jury instruction, which reads as follows:

“Usually, witnesses can testify only to facts they know.

But, a witness with expertise in a specialty may give an opinion in that specialty. In determining the weight to be given an opinion, you should consider the qualifications and credibility of the expert and whether reasons for the opinion are based on facts in the case. Opinion evidence was admitted in this case to help you reach a conclusion.

You are not bound by any expert’s opinion.

In resolving conflicts in expert testimony, weigh the different expert opinions against each other and consider the qualifications and credibility of the experts and the reasons and facts supporting their opinions.”

Appellant failed to object to any particular instruction language but rather made the blanket objection that no such instruction should be given because no expert testimony should be admitted. Appellant argued that the only testimony at trial was that “business is conducted very differently in the Kingdom of Saudi Arabia and the Middle East region generally,” than it is elsewhere, and that the jury had heard insufficient evidence that sales representatives ever work on commission in Saudi Arabia. In response, Appellees pointed to testimony that Appellant’s agent acted as a commissioned sales rep in one entire transaction with their expert witness who testified that that was always the structure he used.

The trial court overruled the objection to the instruction and said that the jury had had opportunities to hear from multiple persons with relevant work experience on customs in the architectural products industry as to how compensation is handled. The court acknowledged testimony that, as the court put it, “Saudi Arabia deals with things a little bit differently,” but stated that it considered this to involve a difference of opinion that the jury could sort out based on the evidence and the relative strengths of the parties’ arguments.

Appellant made several variations on its argument that the trial court erroneously exercised its discretion in allowing expert testimony and instructing the jury in how to weigh the expert testimony. It argued that the court failed to give sufficient weight to the relevant location of industry custom (which Appellant submitted had to be strictly limited to business activity in Saudi Arabia), to the relevant vocation (which Appellant submitted had to be strictly limited to activities of commissioned sales representatives), and to facts that Appellant submitted made the transaction embodied in the supply agreement unusual in various respects.

However, The Court of Appeals agreed with Appellees that these variations shared the common flaw of confusing “the role of the trial court as gatekeeper with the role of the jury as the fact finder to determine what the industry custom was and whether Appellees’ agent knew or should have known of it.”

The Court of Appeals wrote that as gatekeeper, the trial court was required to determine that the testimony would be “the product of reliable principles and methods,” and that “the witness has applied the principles and methods reliably to the facts of the case.” However, the appellate court noted that it wasn’t the court’s duty to weigh the relative strength of conflicting inferences raised by conflicting expert testimony. In other words, the Daubert standard doesn’t involve evaluation of which inferences can be most persuasively drawn from the testimony, but instead “requires a court to admit or exclude evidence based on its reliability and relevance.” A court must focus on the principles and methodology upon which the expert relies—not his or her conclusion.

The Court explained that this case involved a contract dispute where Appellant’s understanding about a way of doing business might “illuminate” the meaning of an ambiguous contract term—an understanding that was of consequence to determining a term in agreement. The testimony of Appellees’ expert witness in particular was admissible because it had a tendency to make the existence of Appellant’s knowledge of a relevant usage or custom more or less probable.

Much of the challenged testimony was admissible to show Appellant’s agent’s actual knowledge of the existence of a custom or usage, given the business world in which he apparently circulated.

This was an independent basis on which the trial court’s decisions may be sustained because it was outside the realm of expert testimony. The Court of Appealsnoted a 1914 state supreme court decision that stated:

“A uniform trade custom is readily accepted by courts to define what is ambiguous or is left indeterminate in a contract, where both parties have knowledge of the custom, or are so situated that such knowledge may be presumed, for the reason that the majority of such transactions are had in view of the custom, and the agreement on which the minds of the parties actually met will thereby be carried into effect.[] Where the custom is proved to be known to both, it may even add terms to the contract.”

Appellant argued that the jury should’ve accepted its arguments that Saudi Arabia is, as Appellant put it, “a unique location” for purposes of this case, and that Appellant had no prior familiarity with sales commissions. However, it had the opportunity to convince the jury of these things and failed to do so.

In summary, under Wisconsin Statute § 907.02(1), the purported experiences of the experts appeared relevant and reliable, and the decision to admit their opinions rested in the discretion of the trial court. Applying the “broad latitude” standard of review, Court of Appeals concluded that the trial court made a reasoned decision and properly applied the terms of the statute.

As a result, the Court of Appeals affirmed the trial court’s ruling in allowing expert testimony at trial and instructing the jury regarding expert testimony.

 

Gage Corp. v. Tamareed Co., 2018 Wisc. App. LEXIS 800 (Wisc. Ct. App. October 4, 2018)